Saturday, December 17, 2011

Many companies and business development executives talk
about the importance of a “win-win” philosophy in their relationships and
negotiations. They want to be
successful and their partners to be successful in a true synergy. But, what is their road map for getting
to a win-win? Too often, there
isn’t a real methodology behind the talk.
Win-win is in danger before the race even starts.

Here’s an approach that can be applied to many different
types of business arrangements to try to achieve that holy grail of
win-win. It has worked for me over
many years of negotiating hundreds of deals.

1. Spend extra time on the economics up front. Since win-win is supposed to mean that
each company makes more money with the partner than it would without, what
modeling has been done to ensure that this becomes reality? In practice, it is tempting to jump
into papering a transaction before serious financial analysis has truly run its
course. Yet, a dedication to
getting the numbers right will typically pay dividends.

2. Respect, rather than take advantage of, your
partner’s largest concerns.
This is harder than it sounds.
Every negotiation will involve a certain amount of chess and horse-trading.
But, if your partner reveals a
walk away position or two that will be standard in its industry, respecting
that position will instantly deepen the relationship.

3.When it comes to the legalese, be prepared to
settle on true neutrality. The
typical contract will favor the side of a deal that prepared it. There isn’t necessarily anything wrong
with that, as long as both sides understand what true neutrality means and,
assuming the leverage is roughly equal, are willing to settle on it. It means reciprocal representations, indemnifications
and confidentiality provisions.
When two companies are located in different states, it often means
choosing a third state’s law to govern the contract.

4. Understand the details. Is the devil really in the
details? Since execution is about
details, the answer is almost always yes.
Sure, contracts get amended all the time, but the wrong starting point
could kill the relationship before it has time to blossom. Lawyers should understand the business
purpose and the business people should understand the legalese. Everyone needs to read the contract.

5. Strive for a long-term contract. As much as corporate America talks
about long-term thinking and strategy, there are many forces that make this
challenging. Quarterly earnings
calls for public companies emphasize 90 days of performance. Revenue recognition rules can
essentially encourage short-term deals. It’s difficult to establish win-win in a short time
frame. Aim for a five-year term. Expect, plan for and demand success. Commitment facilitates win-win.

About Me

Mr. Goldman is a legal, business development and human resources executive specializing in commercial contracts, securities/governance (public and private companies), mergers and acquisitions and management strategy. He has over 20 years of experience advising technology companies.